In a Request for Information ("RFI"), the DOL requested public comment on actions to protect retirement savings and pensions from risks associated with changes in climate.
The RFI was based upon President Biden's 2021 Executive Order on climate-related financial risk. That E.O. directed the department to identify actions it can take under the Employee Retirement Income Security Act of 1974, the Federal Employees' Retirement System Act of 1986, and other relevant laws to safeguard the life savings and pensions of U.S. workers from the threats of climate-related financial risk. In the RFI, the DOL asks a series of questions as to how the Employee Benefits Security Administration ("EBSA") or fiduciaries to plans may reduce climate risk. These include:
- what agency actions can be taken under "relevant laws" to reduce the threats of climate-related financial risk;
- what climate risk data related to plans to should EBSA collect;
- how do plan fiduciaries vote on proxy proposals relating to climate risk;
- what actions should plan managers take to incorporate climate risk into their decisions; and
- should investors be provided education as to climate-related financial risks?
The RFI suggested that penalties may be imposed on fiduciaries that do not invest in accordance with whatever guidelines may eventually be established, stating that "there are civil enforcement provisions aimed at assuring that plan funds are protected. . . ."
The comment period will run for 90 days after publication in the Federal Register on February 14, 2022.
Commentary Steven Lofchie
The expanded authority that the DOL indicates it may seek to require reporting on the manner in which plan fiduciaries vote their proxies raises a concern that the government may implicitly or explicitly pressure fiduciaries to vote their proxies in a politically preferred way. That would have an indirect effect of forcing public and private corporations to act in accordance with a politically preferred manner. The SEC has published a similar proposal that would expand proxy voting disclosure reporting requirements.
While governmental mandates relating to the pandemic have been the subject of fairly considerable controversy and press, developments in financial regulation have far, far greater significance. If the government is systematically monitoring the voting of investment advisers and plan fiduciaries, and in the case of plan fiduciaries, even suggesting that a disfavored vote could be in violation of law, then there is essentially no limit to the government's authority over the private sector.
How much power should the government have over corporate proxies? The potential effects of this Request for Information, and of the SEC rule proposal as to proxy voting, are issues that are worthy of Congressional consideration. At a minimum, the imposition of very significant safeguards against the misuse of the information for political purposes should be required, assuming it would even be possible to prevent the misuse of such information.
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